At the October Action Meeting the Board of Education approved a number of bond transactions designed to fund necessary capital improvements and refund certain bonds to achieve savings.<\/p>\n
The District generated $530 million for its Capital Improvement Program, which will enable a more comprehensive approach to work on the District\u2019s facilities. A portion of the funds will also be utilized to increase internal project management capacity, and contract with an outside firm to assist with selection and sequencing, cost estimation and budgeting and project scheduling and logistics.<\/p>\n
\u201cThese funds will allow us to address capacity issues that we have, so that we\u2019re able to better manage the many projects that we\u2019re working to complete in our schools,\u201d said Dr. William R. Hite, superintendent of The School District of Philadelphia.<\/p>\n
A portion of the bonds ($30 million) were issued as Green Bonds,\u00a0 the proceeds of which are dedicated to energy efficiency projects at facilities across the District.\u00a0 These funds will be utilized to support the Guaranteed Energy Savings Act program recently approved by the Board, which is designed to improve learning environments, reduce environmental footprints, and lower operating costs through more efficient lighting; boiler replacements; cooling infrastructure improvements; temperature control systems; and, heat and ventilation improvements.<\/p>\n
The School District benefited from its two notch bond rating upgrade by Moody\u2019s last December, restoring the District to investment grade for the first time since 1977, and a two notch upgrade by Fitch in early October.\u00a0 The combination of improved finances and a low interest environment, along with the efforts of the Finance Team, resulted in a Total Interest Cost of 3.086%, as compared to a 3.7% rate for its March 2018 bond issuance. When considering just the District\u2019s improved fiscal situation, the credit spread was 59 basis points, 13 basis points less than the 2018 issuance, resulting in over $9 million in interest savings.\u00a0 When compared to the District\u2019s issuance just three years ago, when the spread was 125 basis points, this transaction resulted in a $50 million interest savings.<\/p>\n
The District took advantage of these conditions to refund nearly $340 million in existing GO bonds and State Public School Building Authority Lease Revenue Bonds.\u00a0 Combined, these refundings resulted in over $27 million in total savings through 2034. \u201cWe had a strong positive response to all of our transactions with over $6 billion in orders for $1.1 billion in bonds,\u201d said Uri Monson, Chief Financial Officer for the School District. \u201c The result is lower interest costs so we can invest more of our funds in meeting the core mission of educating the students of Philadelphia.\u201d<\/p>\n
The District refunded its short term Tax and Revenue Anticipation Notes (TRAN) and issued its first public TRAN in a decade.\u00a0 With ratings of MIG 1(Moody’s) and F1+ (Fitch), the TRANs priced at a yield of 1.42%, well below the budgeted figure. The District was also able to manage its cash flows so as to reduce the principal borrowing amount by $25 million.\u00a0 The net result is a savings of over $7 million from the amount budgeted in the current fiscal year.<\/p>\n
The Board also provided the authority for the School District to unwind its last remaining basis swaps.\u00a0 These interest rate swap agreements constitute the biggest risk to the District\u2019s debt portfolio, as noted by both Moody\u2019s and Fitch.\u00a0 The current interest rate environment has provided a unique opportunity for the District to unwind these swaps and receive a cash payment to do so. In addition, since the execution of the swaps the District has been a net receiver of more than\u00a0 $28 million.<\/p>\n","protected":false},"excerpt":{"rendered":"
At the October Action Meeting the Board of Education approved a number of bond transactions designed to fund necessary capital improvements and refund certain bonds to achieve savings. The District generated $530 million for its Capital Improvement Program, which will enable a more comprehensive approach to work on the District\u2019s facilities. A portion of the… <\/p>\n